Question

Exercise 17-9 Using ABC to assess prices LO P3 Way Cool produces two different models of air conditioners. The company produces the mechanical systems in their components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow. Quantity Process Activity Componente Changeover Machining Setups B, 470 80 Finishing Welding Inspecting Rework Overhead Cost Driver $ 582,950 Number of batches 398,937 Machine hours 151,600 Number of setups $1,133,487 $ 415, 360 Welding hours 335,800 Number of inspections 71,250 Rework orders $ 822, 410 $ 148,840 Purchase ordera 30, 500 Number of unita 109,750 Number of units $ 289,090 6,400 920 250 Support Purchasing Providing space Providing utilities 7,500 7,500 Additional production information concerning its two product lines follows. Model 212 5,000 3,800 Units produced Welding hours Batches Number of inspections Machine hours Setups Rework orders Purchase orders Model 145 2,500 2,600 445 520 9, 150 40 170 325 400 5, 320 80 163 Required: 1. Using ABC, compute the overhead cost per unit for each product line. 2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $260 for Model 145 and $112 for Model 212. 3. If the market price for Model 145 is $688.00 and the market price for Model 212 is $34770, determine the profit or loss per unit for each model Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Using ABC, compute the overhead cost per unit for each product line. (Round your final answers to 2 decimals places.) 2 Activity Model 212 Activity driver Overhead incurred assigned Expected Costs Expected Activity Model 145 Activity driver Overhead incurred assigned Activity Rate $ 582 950 398,937 151,600 890 Number of batches 8,470 Machine hours 80 Setups Components Changeover Machining Setups Finishing Welding Inspecting Rework Support Purchasing Providing space and utilities S 415,360 335 800 6,400 Welding hours 920 Inspections 250 Rework orders 71.250 S 148,840 140 250 488 Purchase orders 7,500 Units Total overhead cost Total units produced Overhead cost per unit < Required Required 2 >

Answer 1

Requirement 1:

Activity Rate

Activity Expected costs Expected Activity Activity rate Model 145 Model 212 Activity driver Overhead Activity driver Overhead incurred assigned incurred assigned 445 $582,950 890 Number of batches $398,937 8,470 Machine hours $151,600 80 Number of setups $655.00 per batch $47.10 per machine hour $1,895 per setup 3,150 40 $291,475 $148,365 $75,800 445 $291,475 5,320 $250,572 40 $75,800 Components Changeover Machining Setups Finishing Welding Inspecting Rework Support Purchasing Providing space Providing Utilities $415,360 6,400 Welding hours $335,800 920 Number of inspections $71,250 250 Rework orders $64.90 per welding hour $365.00 per inspection $285.00 per rework order 2,600 520 170 $168,740 $189,800 $48,450 3,800 400 $246,620 $146,000 $22,800 80 $148,840 488 Purchase orders $30,500 7,500 Number of units $109,750 7,500 Number of units $305.00 per purchase order $4.07 per unit $14.63 per unit Total Overhead cost Total units produced Overhead cost per unit 325 $99,125 2,500 $10,175 2,500 $36,575 $1,068,505 2,500 $427.40 163 $49,715 5,000 $20,350 5,000 $73,150 $1,176,482 5,000 $235.30

Requirement 2:

Total cost per unit

Particulars	Model 145	Model 212
Materials and labor per unit	$260.00	$112.00
Overhead per unit	$427.40	$235.30
Total cost per unit	$687.40	$347.30

Requirement 3:

Profit or loss per unit

Particulars	Model 145	Model 212
Price per unit	$688.00	$347.70
Cost per unit	($687.40)	(347.30)
Profit (Loss) per unit	$0.60	$0.40

All the best...